Typically when we talk about banking and race, we’re talking about complying with fair lending laws or the Community Reinvestment Act. In other words, we’re talking about the lending side of the business. Deposits, on the other hand, are often viewed as nonracial or simply green. The national movement to move money from big banks to black owned-institutions — which began taking off last year — upends this paradigm.
The summer of 2016 marked a tangible shift in black America’s understanding of the power of its $1.2 trillion in annual spending. Members of the black community answered the call — fueled by social media, text messaging and word-of-mouth marketing — to move their money from traditional banks to black-owned banks in a larger bid to protect the economic interests of black people.
The #BankBlack movement, as it is known, took off in July when rapper Killer Mike (Michael Render) implored the black community to deploy a portion of its financial resources to black banks to make a tangible difference. Other celebrities, such as Solange, Jesse Williams, Alicia Keys, Beyoncé and Queen Latifah, joined the conversation to urge black Americans to move their money to black-owned banks. In less than six months, black banks — including my own — have seen a rise in web and branch traffic resulting in new accounts, with millions deposited.
While some may profess that moving deposits into black banks fails to guarantee the money will fuel loans to minorities and in low- to moderate-income neighborhoods, the data reflects the opposite view. A Federal Deposit Insurance Corp. report, which examined minority depository institutions from 2001 to 2013, found MDIs are significantly more likely to lend in LMI communities and to minority borrowers than non-MDIs. Furthermore, the same FDIC report said: “African-American MDIs appear to be particularly successful in their mission of serving African-American borrowers.”
The study also found the median share of Home Mortgage Disclosure Act-reported mortgages made to black borrowers in 2011 was 66.7% for black banks, compared with less than 1% for non-MDI community banks. As the study put it: “These findings indicate a significant degree of success by MDIs in serving the purpose that this segment of the banking industry was intended to achieve.”
Now back to the deposit side of the business. MDIs have loan-to-deposit ratios of approximately 72%, a ratio that is very similar to non-MDIs. And some black MDIs — such as Carver Federal Savings Bank in New York and we at OneUnited Bank in Boston — have loan-to-deposit ratios of more than 100%. This ratio indicates a need for us to get more deposits to lend to LMI and minority communities. More specifically, we at OneUnited Bank attracted $20 million from the #BankBlack movement in 2016. During that same time, our bank generated close to $150 million in loans and expanded our loan portfolio by more than $50 million, largely in LMI and minority communities. Yes, #BankBlack fulfills an important need.
Furthermore, anecdotal responses to #BankBlack on social media and in surveys also indicate the movement is fulfilling a need. Here are a few of them:
“I have never been more excited about banking.” — Tamela C.
“I am white and I would Bank Black. Only surprise is why the African-American Community has not done this and more to separate their resources sooner. In fact I work with African-American Youth and predominantly African-American co-workers and I brought information about Black-owned banks to them. People of color have been screwed over since day one from what I know. It is time to get serious about this movement.” — Liesa W.
“Good we used to have our own Black bank here in Phoenix; young people do what's needed to get the economic train rolling again. Great thinking and action move.” — Carolyn L.
The movement will only appeal to more individuals. A recent American Banker article highlighted Mighty, a young company that aims to help depositors compare banks on social impact performance. Mighty is sharing what banks do in their communities — including OneUnited — to attract new customers, especially millennials.
To meet the need for lending to more LMI neighborhoods and to minorities, the next generation of depositors will answer the call to #BankBlack.
No, #BankBlack is not falling short; it’s just getting started.
Teri Williams is president and chief operating officer of OneUnited Bank.